Strengthening Constitutional Self-Government

No Left Turns

Why Health Care Costs So Much

Democrats and Republicans have been trading accusations for years about the reason for the dramatic increase in health care costs. Dems seem to think it’s all a matter of greedy drug companies, while Repubs fault the number of malpractice suits filed by greedy lawyers. The fact is that neither really gets at the heart of the issue--the declining percentage of health care costs that are being paid out of pocket, thanks to the prevalence of third-party health insurance. This chart shows the inverse proportional relationship between the two phenomena.

As E. Frank Stephenson over at Division of Labor puts it, "It brings to mind the saying about eating at a restaurant: If you’re paying I’ll have steak."

Discussions - 1 Comment

"Out of Pocket" is a misnomer, at best. Someone has to pay for health-care, be it the individual, the insurance company, or (gulp) Uncle Sam.

Individuals cannot operate with negative P/L for very long. Likewise, Insurance companies are still duty-bound to turn a profit. The only entity covering health-care costs that can operate (indefinitely, it seems) in the red is the US Government.

Knowing that Uncle Sam can pick up the tab allows the Health Care industry to engage in all sorts of rent-seeking activities. Health care is not alone; education costs continue to skyrocket.

Uncle Sam helps fund both!

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